In economic terms, liquidity represents the ability of a natural or legal entity to obtain cash. In the same way, liquidity can be defined as the quality that an asset has, to be transformed immediately into cash. An asset will be more liquid as it is transformed into money.
A clear example of a liquid asset are bank deposits, since these can be converted into money very quickly, just go to a bank agency or ATM to get the cash.
However, the liquidity that an asset plays an antagonistic role with respect to the profitability that the same asset can offer, which means that there is the probability that a very liquid good can offer a minimum return.
A liquid asset is characterized by: the ease with which it can be sold, with a small margin of loss of value and at the most desired time.
The risk of liquidity, is the probability of a company failing to meet its payment obligations and short - term obligations. In the case of banks, for example, they try to manage daily the amount of cash they have to fulfill their payment commitments.
A lack of liquidity can represent for a company, a waste of opportunities that could be presented at an economic level; as well as an obstacle in the capacity of expansion and maneuvering.
The liquidity of a company can be measured using indicators called liquidity ratios, these are in charge of diagnosing the capacity of the company to meet its short-term obligations. From this diagnosis, it is possible to know the payment capacity of the company and its solvency in the event of adverse circumstances.
Liquidity is an important factor for both public and personal finances, since not having enough cash, it can generate inconveniences when complying with the acquired commitments, in addition to generating interest on arrears, confiscations and in the worst case closure of the business.
